“Many asset managers oriented to actively managed investment strategies have been challenged in recent years by the heavy flows into passively managed funds,” the report stated. “Headlines trumpet the success of Vanguard, BlackRock, and other firms which deliver leading passively managed solutions.”

While the shift to passive management is clear among some types of financial advisors, Practical Perspectives found that “many other advisors remain committed to active approaches, whether used exclusively or in combination with passive solutions.”

'Difficult to Justify'

Advisors say they have to be open to all approaches today.

“As an advisor, I would be open to active fixed income solutions,” said Russell Rivera, president of Voice Wealth Management in New York City. “However, it’s difficult to justify the cost in such a low-interest-rate environment. Who can ask a client to pay 80 basis points for a fund whose best hope of return is $400 -- especially when I add my fee?”

As the Practical Perspectives report attests, high fees are at the top of the list of advisor priorities when dealing with active management firms.

“One of the biggest problems facing the industry is obviously fees, but this is compounded by advisors looking to scale their business while active managers are also looking to scale their business,” said Andrew Almeida, a financial planner with Almeida Investment Management in Islandia, N.Y.

That scenario is causing client customer service to “suffer,” said Almeida, who once worked as an associate portfolio manager at a $1.25 billion active management firm.

“Advisors and portfolio managers are looking at clients in tiers and only providing white-glove service to the top tier,” he said. “This is why more advisors are moving to the RIA space and hiring investment managers in house. Even worse, some financial advisors go to a platform to look for investment managers.”

The result can leave the client paying three layers of fees, and sometimes even four layers of fees if the investment managers use a sub-advisor for a specific sector like emerging markets or fixed income, Almeida explained.

Retail clients would be wise to work with an RIA who is doing comprehensive financial planning and investment management in one place, he added.

“The benefit will be lower fees, better service, and an accountable advisor relationship that has a full understanding of your financial picture,” he said.

Active Management Required

Additionally, advisors deserve active management on their terms, said Kristin Hull, advisor and a portfolio manager at Nia Global Solutions in Oakland, Calif.

“Many clients and their advisors want to leverage their investments for both financial gain as well as social and environmental change,” Hull said. “To address the issues on our planet effectively, indexes -- representing the incumbent economy -- are not the instrument to achieve our more expansive goals. Active management is required.”

“Our financial world is changing, with women and millennial clients demanding more active management,” Hull said. “So these types of impactful strategies will only grow in popularity.”

Brian O'Connell is a former Wall Street bond trader, and author of the best-selling books, The 401k Millionaire and CNBC's Guide to Creating Wealth. He's a regular contributor to major media business platforms, including CBS News, The Street.com, and Bloomberg. Brian may be contacted at brian.oconnell@innfeedback.com.